Friday 25 October 2013 08.30 EDT
First published on Friday 25 October 2013 08.30 EDT

New Zealand's film industry looks set to lose out on a billion-dollar bonanza from James Cameron's Avatar sequels because other countries are offering greater tax incentives to Hollywood studios.

Star Sam Worthington revealed this week that the long-awaited films are due to begin shooting in October 2014. It had been expected that Cameron would return to New Zealand, where special effects company Weta Digital are based. But public-owned broadcaster TVNZ has revealed Twentieth Century Fox may be considering other options for cost reasons.

New Zealand currently offers a 15 per cent tax rebate to foreign studios, but the UK and Australia are now offering 25 per cent for major productions. The disparity has reportedly fuelled a downturn for the country's film industry, with thousands out of work, and the loss of Avatar could prove crippling.

New Zealand economic development minister Steven Joyce told TVNZ's ONE News the nation was keen to hold on to the high-profile sequels. "Obviously New Zealand's very keen to do it because there's a strong association with James Cameron, also a strong association with Weta Digital," he said. "So yes, we're keen to. But also, it can't be done at any price.

"There's still, I think, discussions going on, and there's no doubt about that," Joyce added. "Film Commission and Film New Zealand are working with the producers and the director and are keeping me informed as to how things are progressing."

"The accountants are looking at just the bottom line and going, 'Well, we'll go to the place that gives us the most back, that gives us the best value.' So we're not competitive any more at that level," Graham Dunster of Auckland Actors told ONE News. "The last major production here was Spartacus which finished in October last year. So there's basically been nothing since then."

According to TVNZ, some analysts have reportedly warned that New Zealand's film industry is at risk of collapse.

Neither Cameron nor Weta Digital, which won an Oscar for its groundbreaking effects work on Avatar, has yet made any public comment on TVNZ's report.

New Zealand's film industry was in the headlines three years ago when worries over industrial action saw Kiwi director Peter Jackson threatening to move production on his latest JRR Tolkien fantasy trilogy, The Hobbit, to eastern Europe. The government eventually agreed to rewrite labour laws and offer a $25m tax break to studio Warner Bros in order to retain the films.

Jackson's Oscar-winning trilogy, The Lord of the Rings, helped put New Zealand on the map as a world-class filming location in the early years of the 21st century.